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Wisconsin legislators urge their Minnesota colleagues to push for reciprocity

Senator Bob Jauch (D-Poplar) and Senator Sheila Harsdorf (R- River Falls), along with their colleagues representing Wisconsin's western border regions, sent a letter to Minnesota border legislators calling on them to urge the Minnesota Department of Revenue to agree to the proposal to restore income tax reciprocity put forth by the Wisconsin Department of Revenue.

Legislators and Revenue officials from both states attended a summit at the Minnesota Capitol in St. Paul this February where a discussion of negotiating a new reciprocity agreement was held.

The consensus from the meeting among legislators and Department officials was that reciprocity should be restored for the 2013 tax year. In order for reciprocity to be in place for 2013, both Departments agreed that a new agreement would need to be in place by October 1st, to ensure time to notify employers of withholding changes and amending tax forms.

"Following our February meeting, I was encouraged that both sides could agree on improvements that addressed concerns identified by Governor Pawlenty," said Jauch.

"Wisconsin has agreed to make more timely payments to Minnesota and both states agreed to move forward with an updated benchmark study to determine the amount of those payments. While Minnesota has accepted Wisconsin's proposal, they insist on a new provision that would require Wisconsin taxpayers to subsidize Minnesota taxpayers."

In the absence of reciprocity thousands of Minnesota residents working in Wisconsin pay an estimated $10 million more in taxes because Minnesota tax law limits the credit that Minnesota taxpayers working in Wisconsin can claim for taxes paid to another state. Wisconsin has no tax credit limitation in its tax code.

"Instead of reinstating the long standing reciprocity agreement that served both states so well for years, Minnesota DOR is demanding that Wisconsin taxpayers foot the bill for a tax increase on Minnesota residents," said Harsdorf. "This issue has never before been part of the reciprocity agreement between Wisconsin and Minnesota, and Minnesota does not require similar payments from other states with which they have reciprocity agreements."

Because of this position taken by Minnesota DOR, taxpayers from both states that cross the border to work will not see reciprocity reinstated for 2013. This means continued inconvenience and higher costs for filing tax forms, as well as higher taxes for some Minnesota taxpayers that work in Wisconsin. The letter from Wisconsin Legislators calls on their counterparts in Minnesota to urge their Department of Revenue to agree to the proposal put forth by Wisconsin DOR and restore reciprocity to the benefit of tens of thousands of taxpayers in both states.

Joining Senators Jauch and Harsdorf in working to advance a new reciprocity agreement and co-signing the letter to Minnesota Legislators were Senators Jennifer Shilling, Kathleen Vinehout and Terry Moulton and Representatives Dean Knudson, Erik Severson, Nick Milroy, John Murtha, Warren Petryk, Chris Danou, Jill Billings, Roger Rivard, Tom Larson, Steve Doyle, Kathy Bernier, and Lee Nerison.